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Blue World Economic Index® Report for August 2018

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Brief Explanation

Blue World Economic Index®

Scale: -2 to +2

Release Date:  Usually the Last or First Business Day of Each Month

Release Site: www.blueworldassetmanagers.com

Management Value: Critical

Date: September 4, 2018

 

 

 

Analysis

While the Blue World Economic Index® held its ground in August of 2018, there are some indications of turbulence in Real Estate. On the heels of some quarterly trend upgrades last month, this Major Category showed no change for August. That is a bit deceptive, and without some major positive moves in September, simply won’t hold up. This morning’s Construction Spending report does not offer much optimism.

Outside of that the economy remains solid and cautious as things like tariffs, trade deals, mid-term elections, investigations, SCOTUS hearings, and porn star pay-offs exert their material impacts.

The Numbers

The index held essentially steady at .42, which, while a tick below July, represents a decimal rounding.

Seven out of eight Major Categories remain in the black with only Inflation still swimming in red ink. Inflation had been limping along in “mixed” territory month in and month out until PPI FD and Farm Prices, which book-end the monthly calendar, each came in at levels weaker than their multi-month averages pulling that category fractionally further South. The other four reports from the Inflation category were in line with their trends. Consumer, General, Retail, and Services also moved fractionally lower.

The only real news-makers at all for August were Employment and Manufacturing, where Employment made the only “material” move at .12 to the good. Manufacturing advanced slightly by .04, but the news comes from the Fed/Non-Fed subgroups where in a very unusual and welcome departure from normal the anecdotal heavy Fed sub-group declined, while the hard data Non-Fed subgroup advanced!

The economy is doing great in a vacuum, but the external, non-economic threats to economic health from the second half of the list above are extraordinary. Survey data suggests the cautious tone of an otherwise booming market are based in concerns that the policies producing the high activity are at risk. If we could dispense with some of the noise we’d see an even more robust environment.

The Blue World Jobs Report Analysis will post on Friday morning. We hope to see you there!

 

Every effort is made to ensure accuracy of data transcription but accuracy cannot be guaranteed.  The official release sites should be cross referenced.  The index assignments represent the opinion of Blue World Asset Managers, Ltd. who does not warrant or guarantee predictions based on the index.

©Blue World Asset Managers, LTD Tuesday, September 04, 2018

Blue World Jobs Report Analysis 08/03/2018

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Blue World Employment Situation Report Analysis

Release Date: Usually on the first Friday of the month

Release Site: www.bls.gov

Market Impact: Usually Very High

Management Value: Critical

Date: August 3, 2018 

Brain Surgery is not Rocket Science to a Brain Surgeon©

 

 

 

 

Job growth for the private sector continues to advance at an impressive pace. Even though the headline says 157k, the Private Sector grew by 170k as government got smaller by 13k payrolls. Add to that upward revisions to May and June of 59k and we’ve got a really hot labor market! Today’s graph is the Size of the Labor Force vs. Total Employed Workers, and it shows a decidedly expansionary pattern. Review this and our post “A Flute with No Holes is Not a Flute and a Recovery with No Jobs is not a Recovery” from 2012, and you’ll get a very good visual comparison.

The Labor Force grew by 105k, Total Employed grew by 389k and Total Unemployed fell by 284k. The Participation Rate remains stubbornly below 63% at 62.9%, but the Diffusion Indexes show expansion in all private sector industries, including manufacturing, and not by a little. Remember, 50 is a break even on expansion. Both of these are holding in the mid-60’s.

The bellwether sectors of Manufacturing and Construction had another winning month, and part time workers for non-economic reasons are being hired at a break-neck pace (228k) in a mad dash to satisfy backlogs. The importance of that cannot be overstated.

Wages grew, but probably not enough to spook the hawks. That’s good. We still don’t believe inflation is a realistic threat to the expansion right now, and prophylactic moves to “head it off” are ill advised.

The jobs report is corroborated by the balance of economic reporting over the past month, including GDP. You can get a broader look at the economy at the Blue World Economic Index® report which posted earlier this week.

So far, so good in 2018. Expansion is the name of the game. Go for it with the right hand, but always keep the left hand near the brake with a watchful eye on the economy through us!

Matt is on real time today at 12:05p C on WBBM in Chicago to break it down live on the Noon Business Hour, AM780/105.9FM. If you miss it live you can get the Podcast later today.

The next jobs report is scheduled for September 7th. We’ll see you then. Have a great August!

As always, thanks for reading, and please stay tuned…

Release Site: www.bls.gov

Every effort is made to ensure accuracy of data transcription but accuracy cannot be guaranteed.  The official release site should be cross referenced. The analysis represents the opinion of Blue World Asset Managers, LTD. who does not warrant or guarantee predictions based on its analysis.

 

©Blue World Asset Managers, LTD Friday, August 03, 2018

Blue World Economic Index® Report for July 2018

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Brief Explanation

Blue World Economic Index®

Scale: -2 to +2

Release Date:  Usually the Last or First Business Day of Each Month

Release Site: www.blueworldassetmanagers.com

Management Value: Critical

Date: Tuesday, August 31, 2018

 

Analysis

It’s that time of the cycle for the BWEI®. There are some major changes due to the quarterly trend analyses which always causes some turbulence, and this time was no exception and, in fact, perhaps the poster child..!  There were a couple of downgrades, but they were the overwhelming exception. We are very cautious about trend changes as they are weighted more heavily than the daily reports, so we tend to let them go a bit to make sure they have legs and that we are not hallucinating a direction.

The economy is just flat out humming, and that is reflected in the composite figures. As a matter of fact, there is only one of the eight Major Categories that remains in negative territory (Inflation), but even it made a Northerly move.

Tariffs have been a concern, but in the closing days of the month it seems they have begun to bear fruit. Please recall what Matt said on The Noon Business Hour last month when asked about the tariff issue. Tariffs can be used in two general ways. One is as actual tax policy and the other is for leverage in ongoing negotiations. In the case of this administration it is decidedly the latter, and despite all the tough rhetoric, the EU and China have taken steps in the direction of the negotiating table.

One report that needs special mention this month is GDP, which released last Friday the 27th. It came in at 4.1% which is huge anyway, but the really big news is that Inventories was a 1% drag on the total. Remember, GDP is the “stuff” that the economy “produced.” It doesn’t mean it got “sold.” We always check the Inventory component to determine the impact it had on the total. It can yield a skewed picture of the economy if GDP is big in part because inventories are up by a material amount in the face of weak sales. It means the “stuff” building up will have to be sold at discounts which hurts inflation, and retailers won’t be moving to replace the “stuff” or hiring more people to sell the “stuff.” In turn, manufacturers won’t be buying “stuff” to make “stuff” or hiring people to assemble “stuff”…so that hurts everything from employment to materials, and on and on throughout the economic web. That is decidedly not the case here. The drop in inventories is corroborated by other consumer spending and retail data from the past month, including today’s Personal Income and Outlays and Employment Cost Index reports.  Additionally, because the Inventories Report from the Census Bureau is a two-month lag, it points to a need to scramble to replenish the “stuff” because it is selling faster than it can be produced, which is a great outlook for the economy starting from employment and traveling all the way through. 

The Numbers

As mentioned above, seven of eight major categories are in the black, and that’s a first. The Composite Index shattered all prior records rising to .43 with advances in Employment, General Measures, Inflation, Manufacturing, Retail and Services. Consumer Measures and Real Estate both retreated a little bit, but the only one of any concern is Real Estate as there may actually be some trouble brewing there as six of nine reports posted negative scores. We’ll have to keep an eye on it.

Watch for the Blue World jobs report on Friday and then Matt goes on WBBM AM780 and 105.9FM at 12:05p Central in Chicago to break it all down live. If you can’t tune in you can get the Podcast here later in the day.

Have a great month and we’ll see you back here for the next BWEI® report at the end of August.

 

 

Every effort is made to ensure accuracy of data transcription but accuracy cannot be guaranteed.  The official release sites should be cross referenced.  The index assignments represent the opinion of Blue World Asset Managers, Ltd. who does not warrant or guarantee predictions based on the index.

©Blue World Asset Managers, LTD Tuesday, July 31, 2018

Blue World Jobs Report Analysis July 7, 2018

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Blue World Employment Situation Report Analysis

Release Date: Usually on the first Friday of the month

Release Site: www.bls.gov

Market Impact: Usually Very High

Management Value: Critical

Date: July 6, 2018

Brain Surgery is not Rocket Science to a Brain Surgeon©

 

FOLLOW THEM FOR FUN! LISTEN TO BLUE WORLD FOR STRATEGIC ACTIONABLE INTELLIGENCE!

It’s another massive report that gets turbo-charged with 37k in upward revisions to the last two months! Let’s get straight to the numbers.

We see 213k on the marquee and 202k came from the Private Sector, which keeps that average at 211k with half of 2018 in the books. The Participation Rate double-ticked to 62.9, the Total Employed jumped another 100k, the Labor Force ballooned by 601k, and the Diffusion Indexes for both Manufacturing and the Private Sector astonishingly remain in the mid-60’s!

If there is any downside at all it’s that wage inflation remains elusive, but that is also a side effect of a point about workers coming back to the work force that we’ll detail below.

The labor market is three dimensional and cannot be adequately analyzed by a two-dimensional headline of two or three stats. For example, there will be those that point to the Unemployment Rate ticking up to 4% with the number of Unemployed growing by half a million. They are either disingenuous or simply misinformed.

It is a crucial yet little understood method of the unemployment report that not all of those without jobs are counted as “unemployed.” In order to be unemployed for reporting purposes one must also be a member of the Labor Force. One is only a member of the Labor Force IF they have actively looked for employment recently. In other words, we are only “unemployed” if we want work, are actively looking for work, and cannot find work. Table A-15 of the release, Alternative Measures of Labor Underutilization, tracks those who are considered Not in the Labor Force, marginally attached and discouraged from even seeking a job. When we hear talk of the “true” unemployed rate, that’s what they mean. This is why Blue World puts such heavy emphasis on the dynamic relationship of changes between the size of the Labor Force, those Not in the Labor Force, Total Employed, Total Unemployed, and the Participation Rate. Today is a fine example. As identified above, the number of “Unemployed” swelled by 500k. However, nearly that exact number came off the Not in Labor Force total. These are potential workers who have left the sidelines, looked for work and simply not found it yet! This is a VERY GOOD sign, not a negative as some have portrayed it already this morning.

Blue World Economic Index® won’t post a report this month as we are in the middle of doing quarterly trend analysis and there are a great many changes. We can tell you the index rose at the highest rate since we began publishing and smashed the previous record high water mark. We’ll post the full update at the end of July and we’ll have plenty to say about tariff and trade wars then.

We hope the 4th was safe and wonderful. Enjoy the rest of your summer!

Thanks for reading, and please stay tuned…

Release Site: www.bls.gov

Every effort is made to ensure accuracy of data transcription but accuracy cannot be guaranteed.  The official release site should be cross referenced. The analysis represents the opinion of Blue World Asset Managers, LTD. who does not warrant or guarantee predictions based on its analysis.

 

©Blue World Asset Managers, LTD Friday, July 06, 2018

Blue World Jobs Report Analysis – June 1, 2018

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Blue World Employment Situation Report Analysis

Release Date: Usually on the first Friday of the month

Release Site: www.bls.gov

Market Impact: Usually Very High

Management Value: Critical

Date: June 1, 2018

Brain Surgery is not Rocket Science to a Brain Surgeon©

 

The report looks great at the headline and most of the detail backs it up. There are a couple of rough spots in the usual places so let’s take a look.

The headline posted 223k net jobs added and the private sector accounted for 218k of those which keeps the 2018 average above 200 and revisions to March and April netted us 15k. The Total Employed rose and the Total Unemployed fell while the Labor Force got a little bigger.

The Participation Rate and Not in Labor Force stats remain stubborn with the former falling a tick and the latter rising for a third straight month and flirting with 96M. The baby boomers retiring is certainly a factor but that bleeding has got to be slowed.

Trade and Transport, Retail, Services, Manufacturing and Construction were all big gainers and wages showed some signs of life with Y/Y up 2.7% for hourly employees and a full 3% for salaried workers. The work week was 34.5 hours long for May which is exactly the average for 2018 to date vs. 34.4 hours for 2016 and 2017.

A stat that is not highlighted too much outside of Blue World’s report is actually the big indicator today. The Diffusion Indexes have remained above 60 for three months in a row. That hasn’t happened in a while and is a great indicator of underlying strength in the labor markets.

Because they are both due today, we’ll combine jobs analysis with a summary of May’s Blue World Economic Index® which actually hit .2 intra-month for the first time since we’ve been publishing it, but just couldn’t hold that level as the Real Estate major category took a beating in the final week. Regardless, the index did advanced to .18, matching the recovery record high set in January of this year.

Matt will be on AM780 and 105.9FM in Chicago at 12:09 today to break down the jobs report live and the Podcast can be found later this evening.

Thanks for reading, and please stay tuned…

Release Site: www.bls.gov

Every effort is made to ensure accuracy of data transcription but accuracy cannot be guaranteed.  The official release site should be cross referenced. The analysis represents the opinion of Blue World Asset Managers, LTD. who does not warrant or guarantee predictions based on its analysis.

 ©Blue World Asset Managers, LTD Friday, June 01, 2018